Tier-2 Home Prices Up 63% in 5 Years vs 42% in Top 8 Cities
Residential prices in 11 emerging Tier-2 markets have risen nearly twice as fast as those in India's top eight cities, according to a joint CII and Knight Frank India report titled India's Next Real Estate Markets.
The numbers
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2016 to 2026: an average annual growth rate of 8% in the 11 markets, against 4% in the top eight cities
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2021 to 2026: a 63% rise in the 11 markets, against 42% in the top eight
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The 11 markets: Bhopal, Bhubaneswar, Chandigarh Tricity, Goa, Indore, Jaipur, Kochi, Lucknow, Nagpur, Visakhapatnam and Coimbatore
Why it is happening
The report credits stronger economic fundamentals, backed by better infrastructure, connectivity and consumption. Knight Frank India chairman Shishir Baijal said India's real estate growth is broadening beyond the traditional metropolitan centres, and that investors and developers have a wider set of opportunities but need to be more selective.
Commercial real estate follows
Ten of the 11 markets (excluding Goa for this calculation) hold about 60% of the Tier-2 shopping-centre stock.
"Tier-2" does not mean cheap
Prices differ widely across the 11 cities, so a smaller city does not automatically mean a lower price. Analysts also remind buyers to weigh risks such as lower resale liquidity and uneven local job growth.
How it fits other data
Anarock's Q3 figures show the Mumbai region and Bengaluru accounted for 48% of top-seven sales, while Kolkata and Chennai slipped. Deloitte has found that Tier-2 households spend about Rs 3.9 lakh on home interiors, around 74% of the Tier-1 level. Together the numbers point to demand moving beyond the biggest cities.